Abstract

With the threat of stagflation and interest rate rises, the current economic climate shows little sign of improvement in the near future. John Van Reenen finds that the government’s severe austerity programme, with its very pessimistic view of future UK growth is risking the recovery through premature scrapping of our economic capital. Policies such as the cap on skilled migrants and the planning decentralisation will reduce the potential for growth, not raise it. Instead, the government should get the conditions right for increasing competition, innovation and education, and focus on matching the UK’s comparative advantage with areas of future growth such as higher education.